Can I Hire Someone to Evaluate Mobile Home Park?

Question

We are looking at this property: https://www.zillow.com/homedetails/117-Canyon-St-Horseshoe-Bend-ID-83629/232405366_zpid/

The more I research about due diligence, the less qualified I feel to carry it out. Is there a person I can hire to do this. What would I call that role so I could Google it and find someone to help me?

Russell Brazil · Answer

The people I know who would be qualified to evaluate it might buy it out from underneath you if its a good deal, lol.

Jacob Sampson · Answer

hey Sterling I haven't asked his permission to send you his way so if that is a problem @John Jacobus I apologize, but John may be able to help/provide some direction.

Jacob Sampson · Answer

@Russell Brazil often makes good points.

John Jacobus · Answer

@Sterling Jaquith I would gather a few additional details from the broker:

• How many lots are occupied by owners vs home renters vs RV vs vacant?
• What is the lot rent and home rent?

This looks like it’s a resort area which may explain the unusually high ~$50k / lot price.  You’ll need to validate the demand and financial operations of the park to justify such a high price on a per lot basis.

My initial impression is that this property is richly priced but it depends on the lot rent and expenses.  Generally speaking, we try to buy MHP’s where lots are priced <$25k per pad but we break that rule in the larger, high-demand markets.   It’s a rough guideline; not a hard rule.  There are definitely instances where $50k/lot can work (e.g., near the Pacific Ocean in premium locations with high lot rents and strong demand or well located parks with major operational upside).

I wouldn’t get spooked by the 9% cap rate.  That’s not a terrible deal if the market is strong and you can validate that it’s a true cap rate (i.e., the income and expenses have been validated and lead to a reasonable belief that the property can produce net operating income that results in a 9% cap).  Buying at a 9% cap and financing the purchase with 5%-6% debt still leaves you with a healthy spread which should result in a decent return.

As next steps, I recommend asking the broker about the items above, obtain a rent roll and income statement for the past 1-2 years, and visit Best Places to review the population size, avg apartment rent, median home price, and unemployment rate in the metro area.

Sterling Jaquith · Answer

Thanks @James Hamling. I sent you a message!

James Hamling · Answer

@Sterling Jaquith that is what I would call a horrible deal, for buyer, or an amazing "okie-doke" for a seller if they can pull it off. I would never give a second look at any park deal a penny under a 14cap.

The technical term for what you'd be looking for is a REI Consultant, and while I am and have been one for some years I couldn't even tell you how to find a legitimate one because I never set out to do this I literally feel into this and it just created itself and I do 0 advertising, marketing or promoting of any kind what so ever, I am 100% referral based.

I would suggest a qualifier question as how much in performing purchases are under their belt, what groups have they been affiliated. Most of my clients have been fund's of various kinds and investment groups. And no, I don't "steal" deals because I simply don't need to, their is no shortage of opportunities out there.

As a last note on that park, I'd run not walk away, seriously. To put it in terms, I am wrapping up a park deal offering at this moment just finishing up the prospectus and valuation report for offering and will be presenting it at about an 18cap, that's a fair offering for a MHPark. I don't think i could sleep at night taking someone for a 9cap on a MHPark. Multi-unit housing is most valid at the 9cap range, that could be a decent deal but not for a MHPark.

I hope that helps.

Sterling Jaquith · Answer

@Russell Brazil I had thought of that but I don't think it's currently priced as a good deal. I also know the seller so I think they would consider our offer first.

Can I Hire Someone to Evaluate Mobile Home Park?

Most Popular Reply